I've said this many times but worth repeating: A p2p exchange (p2px) is the single most important thing needed for bitcoin to succeed. I'm glad you guys are pumped up about this, but do not create a solution just because its the first thing that comes to your mind.

Any exchange needs the following or its guaranteed to fail:

Quick transactions: If the end-to-end transaction takes more than 30s, I will probably continue to use centralized exchanges.

Simple: I should click buy and its bought. If I have to continue with 4 extra steps including contacting the other party, manually sending cash (using paypal or whatever) the burden of a transaction is too excessive. I'm personally not going to use a glamorized craigslist.

Secure: I agree with other posters here who indicated that inputing my dwolla info into the p2px is out of the question. A bot is going to do what? Someone else's random transaction takes place thru my main account?

I know this is hard, but lets plan this for success like our guru Satoshi did.

My opinion is that we need to anonymize the fiat and decouple the buyer and seller. That's what exchanges do. On placing an order, the fiat and BTC (or other cryptocurrency) goes into the network and is unavailable to the trader. Once a match is found, they are atomically exchanged. Cancelling a pending order will bring it back into the trader's account.

So far, we can already do this within cryptos. Basically, we need a way to mine fiat. A crypto pegged to a fiat currency (such as the originally proposed RealCoin) may be the solution here. RLC needs to be analyzed by independent minds before this it can be adopted for p2px. Unfortunately, we would end up depending on Realcoin to continue to exist, not be target of government shutdown, 51% attack and various other risks.

Another alternative is to create temporary financial packets where currency is anonymized and stored is a sort of decentralized escrow while an order is unfilled. This will allow miners to allow small amounts into and out of accounts specifically designed to take p2px cash and keep a small fee for the service (analogous to transaction fee). This account is strictly a business account that would not hold any real cash.

So a transaction may work like this:
1) 1QaZ wants to buy $1,000 worth of BTC at $4
2) Money is extracted from 1QaZ's account (dwolla/paypal/whatever) and is sent to say, 100 escrows at $10+fee each.
3) Once money transfer is confirmed, BTC is transferred to 1QaZ's bitcoin address using the escrow method.
4) once BTC transfer is confirmed, the 100 escrows each send $10 to seller.

Of course, 100 escrows twice cost $50 on dwolla, making it infeasible. Dwolla also needs a bank account.

Perhaps paypal with a gift or other mode to avoid payment fees. Also setting up paypal account (without a linked bank account) is fairly easy.

Frankly, I prefer smart folks here figure out a way to mine fiat.